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Archive for Offer In Compromise

Freeman Law: The Tax Court In Brief

Freeman Law: The Tax Court In Brief

The Week of February 22 – February 26, 2021

Llanos v. Commissioner | February 22, 2021 | Kerrigan, K. | Dkt. No. 8424-19L 

Short Summary:  IRS assessed § 6702 penalties against petitioner for filing frivolous returns. Eventually the IRS issued a Final Notice of Intent to Levy, to which the taxpayer timely request a CDP hearing. At the CDP hearing, the petitioner indicated that he had not received the required notices of deficiency for the civil penalties. Petitioner did not request any collection alternatives. The settlement officer upheld the levy action, and petitioner filed in tax court. Tax court held for the IRS.

Key Issue:  Whether petitioner made a “meaningful” challenge to the penalties so as to trigger a de novo review, and whether the levy action was appropriate.

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Offer-In-Compromise Mills Make IRS Dirty Dozen List

Offer-In-Compromise Mills Make IRS Dirty Dozen List

Each year, the IRS issues its infamous “Dirty Dozen” list.  Prior awards have gone to micro-captives, syndicated conservation easements, and taxpayer identity theft.  This year, the IRS added another abusive scheme:  “Offer-in-Compromise Mills.”  These tax debt resolution companies – which often advertise resolution of tax debts “for pennies on the dollar” – are the subject of this Insight.

IRS Offers in Compromise

The Internal Revenue Code specifically permits the IRS to accept less than the full amount of a tax debt, which is referred to in tax parlance as an “offer in compromise.”  Freeman Law has discussed offers in compromise in prior Insights (see Everything You Need to Know about IRS Offers in Compromise; A Fresh Start for Many?  Economic Downturn Means an Upturn in Favorable Tax SettlementsA Fresh Start for Taxpayers:  The Offer in Compromise; and The Art of IRS Collection Defense in a Post-COVID 19 World), and its attorneys have successfully represented a multitude of clients in resolving their tax debts through this and other collection alternative mechanisms.

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How An Offer In Compromise Works

How An Offer In Compromise Works

Do you owe back taxes to the IRS? Until your debt is paid in full, the federal agency can assess penalties, interest, and more. Fortunately, you have options on how to settle your debt with the IRS. One solution is an Offer in Compromise. Read on to find out what an Offer in Compromise is, how it works, and how a tax attorney can help you qualify.

What is an Offer in Compromise?
An Offer in Compromise is a program to help you settle your tax debt with the IRS. If you owe the federal agency money in back taxes, you can work with an attorney to apply for this program to help reduce the amount of money you owe them. In some cases, the amount you agree to pay can be significantly less than what you originally owed. According to the IRS, the agency takes the following factors into consideration when determining if you qualify for the Offer in Compromise program:

-Ability to pay
-Asset equity

What it Means for You and Your Tax Debt
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The IRS Offer In Compromise – 6 Common Myths And Misconceptions

Venar Ayar OIC

When people first hear about the IRS Offer in Compromise (OIC) Program, (depending on where they hear about it from), many common misconceptions may come with it.  So, I am here to clear up some of the most common myths about the OIC Program

Myth #1 – The OIC Program is a scam or “too good to be true”

There are usually two extremes that people go to when you ask them what they think or know about the OIC program.  This myth is on one end of the scale.  (We will cover the other extreme in the next section).  People often immediately (and falsely) assume that the OIC Program is a scam.  I will admit…there are several “tax resolution” companies out there who do use the program to scam innocent people by promising potential clients that they will get them an Offer in Compromise (and settle for pennies on the dollar) before even looking at their financials.  While that is all codswallop, the program itself is NOT a scam. The IRS has 10 years to collect a tax debt from a taxpayer.  And they certainly do not want to spend that time trying to collect a tax debt that the taxpayer simply cannot pay. They also do not want to cause undue hardship by demanding someone pay their full liability if they cannot afford to do so and still meet their basic living necessities.  So, they are willing to work with taxpayers to get at least some of what is owed to them.  It makes the most economical sense to the IRS if they ever want to see any of that money.

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How To Qualify For An Offer In Compromise

How To Qualify For An Offer In Compromise

If you have an outstanding tax debt with the Internal Revenue Service (IRS) but you’re concerned that you are unable to pay it, you may have the option to settle the debt for an amount lower than what you owe. The IRS provides a solution called an Offer in Compromise (OIC) that allows qualifying taxpayers to enter an agreement to pay off their tax liability. An attorney who specializes in tax debt relief can assist you with applying for this tax debt relief program.

The guidelines for qualifying for an Offer in Compromise are somewhat strict but certainly straightforward. First, your reasons for applying must be one of the following:

  • Doubt as to Liability – If the IRS has reason to believe that the amount of your tax debt is incorrect, this would be considered doubt as to liability.
  • Doubt as to Collectibility – When the IRS doubts that it would be able to collect the full amount of the taxpayer’s debt, it may accept an Offer in Compromise. This is often the case if the amount of the taxpayer’s income and assets is lower than the amount of the liability.
  • Effective Tax Administration – The IRS may also accept an Offer in Compromise if paying the tax debt would create a financial hardship for the taxpayer or if collecting the tax debt would be unfair or inequitable.

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How Do I File An IRS Offer In Compromise?

Venar Ayar - Offer In Compromise

As Ben Franklin once said, “In this world, nothing can be said to be certain, except death and taxes.” If you owe a tax debt to IRS, it can be a frightening experience. The IRS has the power to seize and sell your property, place a lien on your property, garnish wages, or even take money straight out of your bank account. If you owe a tax debt to the IRS it is critical that you reach a resolution as quickly as possible, and hopefully, one that is as beneficial to you as possible. For some people, the best option for a solution is the IRS Offer in Compromise (OIC) program. This article will explain what the OIC program is and how to file an OIC.

What is the OIC Program?

The IRS OIC program is a settlement agreement between a taxpayer that owes a tax debt (this includes both individual taxpayers and businesses) and the IRS, that allows for the taxpayer to resolve their tax dispute for less than the full tax debt amount owed. If a taxpayer qualifies for the OIC program they can make a monetary offer to the IRS for a full settlement of their dispute, which the IRS will ultimately accept or reject.

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6 Common Offer In Compromise Mistakes To Avoid

Venar Ayar

Failure to get your offer in compromise (OIC) accepted is always devastating both financially and even emotionally because you are left with a tax burden that might be worse than before. A lot of these offers are rejected because incompetent tax resolution firms make one of six common mistakes. So, what are these mistakes, and how can you avoid them? We have looked at the 6 common offers in compromise mistakes that you should avoid.

What Is An Offer In Compromise?

You cannot make an OIC if you don’t know what it entails. This is an option provided by the IRS that permits taxpayers to settle part of their debts. It is a great option since it gives taxpayers a new beginning with the IRS, but the primary aim of the offer is to come to an agreement for payment that is friendly to both the IRS and the taxpayers.

You can submit an offer in compromise on the following grounds:

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IRS New Booklet On Offer In Compromise


The IRS just issued an updated publication with information for individual taxpayers and business owners unable to pay their taxes. This electronic pub, Offer in Compromise Booklet, helps people understand how an offer in compromise works.

An offer in compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. An offer in compromise is an option when a taxpayer can’t pay their full tax liability. It is also an option when paying the entire tax bill would cause the taxpayer a financial hardship. The ultimate goal is a compromise that suits the best interest of both the taxpayer and the agency.

When reviewing applications, the IRS considers the taxpayer’s unique set of facts and any special circumstances affecting the taxpayer’s ability to pay as well as the taxpayer’s:

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What Is A Doubt As To Liability Offer In Compromise?

Venar Ayar - OIC

A doubt as to liability Offer in Compromise (OIC) can be used to settle tax debt when there is a legitimate dispute about whether you actually owe the debt. If accepted, you may use a Doubt as to Liability OIC to settle your tax debt for much less than owe, sometimes for pennies on the dollar.

The process of preparing a Doubt as to Liability OIC takes a lot of effort and knowledge of IRS practices, so consult a tax attorney for assistance.

When Doubt As To Liability Exists

Doubt as to liability generally exits when there is a dispute about the tax assessment that couldn’t be argued earlier for some reason. In other words, the time to dispute the tax liability has passed, but you have a good argument for disputing it.

Doubt as to liability may come up in the following situations:

  • New evidence is found after a tax assessment.
  • You were unaware of a tax assessment and never received notices from the IRS.
  • The IRS audited your return and adjusted your tax liability, but you didn’t receive notices from the IRS.
  • You filed an amended return, but it was never processed by the IRS.
  • Errors made by employers on wage information returns or errors made by the IRS.

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Offer In Compromise FAQs

Chuck Woodson, Offer In Compromise

We’re all responsible for paying our fair share of taxes each year. But what happens when the amount that you owe is simply out of reach? What happens if you failed to make payments in a timely manner and your financial circumstances have shifted to the point where your cumulative debt is beyond your ability to pay? In the face of this untenable position, your best option for paying the IRS may be what is known as an Offer in Compromise.

The Goal of the Offer in Compromise

The Offer in Compromise, or OIC, was created to accomplish two goals: it allows American taxpayers who are unable to pay the full amount of their tax debt a way to negotiate a payment that is in keeping with their ability to pay, while at the same time providing the IRS with the ability to collect at least a portion of the amount that is owed to them. The process is neither simple nor fast: it generally takes at least one to two years for both sides to come to an agreement on an amount to be paid.

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What Is The Difference Between An IRS Partial Payment Installment Agreement And An Offer In Compromise?

In very simple terms, a Partial Payment Installment Agreement (PPIA) requires you to give part of what you earn to the IRS, and an Offer in Compromise (OIC) requires you to give part of what you own to the IRS.

Anatomy Of An IRS Partial Payment Installment Plan

The Service generally accepts PPIA applications if the taxpayer has insufficient assets to liquidate and insufficient income for a full payment plan. Here are the specific qualifications per the Internal Revenue Manual:

  • Limited disposable monthly income,
  • Owe over $10,000,
  • File Forms 433 and 9465,
  • No outsanding returns,
  • Not in bankruptcy,
  • No offer in compromise in force, and
  • Limited assets.

Calculate your payment based on your disposable income in Form 433. The IRS expects the maximum, but do not go too high or you risk defaulting on the agreement. The filing fee is $225 ($107 if you elect the direct debit option).

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